Voluntary Contributions to HECS Debt
Everyone wants to know whether you can voluntarily pay off your HECS-HELP debt when you start earning decent money, the answer is of course you can!
In fact, its quite advisable to make contributions to your HECS debt (HELP Debt), as it will save you considerable interest and inflation over the years.
Make Payments to HECS Debt
If you are like me and have around the average owing on University HECS debt ($15,000) you would be wise to start making your own contributions.
HECs Debt and HELP Debt can take anywhere between 5-10 years to pay off, meaning your salary is docked constantly to make repayments. I have a different outlook and believe that not only should you make the compulsory payments, you should also make voluntary contributions of around $2000 a year. This will limit the life span of your HECS loan by 5 years easily. Think about it, thats only $166 a month over a full year, to save 5 years of payments + potentially over $1500 in interest.
How do I make payments to my HECS/HELP Debt?
- You can make payments via Direct Deposits into the ATOs account.
- BPAY your contributions.
For more information on making payments to your HECS debt I would suggest reading the official Government website at: Going to Uni.
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2 Responses for Voluntary Contributions to HECS Debt
Hey Alex,
You have to weigh up your options carefully when paying voluntary HECS debt payments.
It is complex and different for everyone depending on your situation.
If you pay it off early you get a 10% discount on the whole amount (or any amount over $500) and you save the inflation (interest) added to the amount of the term of the loan. It also means that you have less money in your pocket at the end of the day.
HECS debt doesn’t go up with interest as such it goes up with inflation. So in a perfect world your wages should go up by roughly the same percentage as your HECS debt so in 10 years it will still be the same amount in that days dollar terms.
For alot of people I’m sure they will get satisfaction about not having the debt.
I think what you have forgotten to factor in is that if you SAVED $2000 a year and invested it you would also get interest on that amount meaning the ‘saving’ of ‘interest’ from paying it off $2000 a year would be far less (but you would get the 10% saving on each amount you pay).
There is a lot of people (in media) that say that keeping your HECS debt for as long as you can is the best option as it will be the cheapest debt you’ll probably ever get. I believe this is true to a certain degree.
There is definately advantages to paying off the debt with a voluntary payment in the last year of payments as you would have paid it off with your wage either way and you’ll receive a 10% discount on the final amount owing (through your tax return).
The other advantage of not paying your HECS off now is the extra money you will have incase you lose your job etc. If you lose your job after 3 years you will have $6000 less in your bank account. You won’t have to pay off your HECS at the time but you wont be able to access that money again.
Personally I have about 2 years left of compulsary payments left through my wage so I’m just going to pay it off because I have the cash now sitting in the bank and I’ll get the 10% discount.
I just thought I’d point out a few things I didn’t get out of your article so others can be informed.
Thanks,
Scott
Thanks Scott for pointing out the various factors in paying of a HECS….very helpful.
